UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next
Author: Egerius One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 2247  
Subject: Re: Meta-investing Date: 6/26/2000 6:52 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Jon,

Let me attempt an answer to your question that tries to put things into a personal, overall perspective. I am not saying my personal view is any better than the next person's, but it is part of the criterion I use to evaluate my investment picks. I choosing a company to invest in, I focus on three principal areas: (1) long-term prospects for growth and earnings based on past performance; (2) being well-positioned for the future based on new product lines and research and development; and (3) social responsibility. For the first, I look not only at the numbers (P/E/, PSR, PEG, ROE, ROIC, etc.) but also at long-term debt, past growth and dividend rates, efficient management, market/industry leadership, and brand name quality products that people like. Johnson & Johnson is the classic example of a good company in the first area. For the second area, I look at R&D and new products, as well as any steps that company has made to enter new market areas or new ventures that indicate managerial foresight and good judgement as to where to position the company for the future. Again, JNJ is a good example here, as is Intel.

The hardest to define, for me, is area three: Just what is a "socially responsible" company? For me, the first measure of a responsible company is that the bulk of its efforts, its operations, and its product lines must promote what is creative and positive in human culture; as well as provide a concrete benefit(s) to society as a whole. It must not be or induce destructive, degrading, or harmful behaviors or effects by or on human beings. Thus--for me--alcohol, tobacco, weapons, sweatshops, and polluters are "out"; while food, healthcare, energy, literary firms, the arts, and information technology are "in." The second measure of a responsible company, in my view, is that does not--by its primary or ancillary operations, or by its products--poison or endanger the environment we all live in; or that--if it has in the past--it is making sincere and comprehensive efforts to rectify its past abuses and clean up the ecological mess it has made. The third measure of a socially responsible corporation is how it treats human beings--its workers, its customers, the people living in the countries it operates in. This means no practices or actions harmful to the health and safety of its labor force or injurious to their legal rights; no practices that support or aggravate human rights abuses; and an enlightened corporate policy that promotes worker welfare and financial savings (daycare, 401Ks, maternity leave, participative team management, etc.) As long as a company comes reasonable close to meeting these criteria of mine, I am willing to consider it an investment candidate for my money.

Can such socially responsible companies be profitable given these "restrictions"? Certainly. Companies that are socially responsible tend also (generally) to be efficient and cost-effective in their long-term operations; to have good management gifted with foresight and a long-term business horizon; and to have greater intangible assets such as goodwill and community support than those that are not. Furthermore, SRI companies tend to have less problems with state and federal governments and the courts. Being socially responsible spares them the costly and time-consuming (as well as time-wasting) preoccupations of dealing with class action lawsuits, consumer complaints, and regulatory interventions that plague the bottom lines of so-many wasteful corporations. And, SRI companies also tend to avoid many (though not all) of the worst labor-related problems because of their enlightened, employee-friendly policies. This too is a benefit to their long-term "bottom line." Of course, not all corporations fit this rosy picture to perfection; nor do all SRI companies have all these attributes. But, all other things being equal, they do tend to operate more efficiently and profitably than non-SRI concerns do. For proof, compare the performance (and ills) of Intel with IBM and Microsoft; or of Enron with Exxon-Mobil. It pays to be an SRI-conscious company.

Egerius
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next

Announcements

Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Post of the Day:
Macro Economics

Implications of the Ballad of Ted Plotz
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement